Securities and Exchange Commission v. Antar

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
11-28-1995
Securities and Exchange Commission v. Antar
Precedential or Non-Precedential:
Docket 95-5283
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"Securities and Exchange Commission v. Antar" (1995). 1995 Decisions. Paper 296.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 95-5283
IN RE: SAM M. ANTAR,
Petition-Defendant
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff-Respondent
v.
SAM M. ANTAR, ALLEN ANTAR, and
BENJAMIN KUSZER,
Defendants
and
RORI ANTAR, SAM A. ANTAR, MICHELLE ANTAR,
ADAM KUSZER, SAM KUSZER, SIMON KUSZER,
ROSE ANTAR and SAM M. ANTAR,
Relief Defendants
HON. NICHOLAS H. POLITAN,
UNITED STATES DISTRICT JUDGE
FOR THE DISTRICT OF NEWARK,
Nominal Respondent
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 93-cv-03988)
Argued August 2, 1995
Before: MANSMANN, HUTCHINSON* and ROTH, Circuit Judges
(Opinion Filed November 28, 1995)
1
* The Honorable William D. Hutchinson participated in the oral
argument and decision in the above case but died before the
Opinion could be filed.
Kathryn Keneally, Esq. (Argued)
Linda Donahue, Esq.
Kostelanetz & Fink, LLP
230 Park Avenue
New York, New York 10169
Attorneys for Petitioner-Defendant Sam M. Antar
Randall W. Quinn (Argued)
Senior Litigation Counsel
Eric Summergrad
Principal Assistant General Counsel
Catherine A. Broderick
Counsel to the Assistant General Counsel
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attorneys for Respondent Security Exchange Commission
Gerald Krovatin, Esq.
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, NJ 07068
Attorney for Respondent Allen Antar
Marvin Gersten, Esq.
Gersten, Savage, Kaplowitz & Curtin
575 Lexington Avenue
New York, NY 10022
Attorney for Respondents Benjamin Kuszer,
Adam Kuszer, Sam Kuszer, Simon Kuszer,
Rose Antar and Sam M. Antar
2
OPINION OF THE COURT
ROTH, Circuit Judge:
This Petition for Writ of Mandamus raises the delicate
and difficult issue of judicial disqualification. Petitioner,
Sam Antar, is the defendant in a civil action brought by the
Securities and Exchange Commission ("SEC"). He is also the
father of Eddie and Mitchell Antar, who were convicted of
conspiracy to commit securities and mail fraud. On appeal, the
sons' convictions were overturned and the district judge was
disqualified because of a statement of purpose made by the
district judge which we found to be at odds with the judge's
constitutionally mandated goal of ensuring fair trial. United
States v. Antar, 53 F.3d 568 (3d. Cir. 1995) ("Antar II"). In
the course of the criminal proceedings, the district judge also
remarked on the involvement in the conspiracy of the Antar family
as a whole and of Sam Antar in particular.
The same judge who presided over the criminal
proceedings now presides over the SEC action. SEC v. Antar,
Civil No. 93-3988 (D.N.J.). Sam Antar has filed this petition
seeking to have the district judge removed from that action.
We must determine what effect the earlier recusal
should have on our resolution of the present petition--
particularly when that recusal is considered along with
additional comments by the judge on family involvement in the
conspiracy. We concluded in the criminal action that the judge
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had created an appearance of prejudice toward Eddie Antar and
members of the Antar family, an appearance manifested by a
statement which a "reasonable observer" would interpret as
indicating that the judge had the goal in the criminal trial of
recovering substantial funds from Eddie and Mitchell Antar. Antar
II, 53 F.3d at 577. In light of this earlier holding, considered
together with the judge's further comments, we conclude that
disqualification is also required in the closely related SEC
proceeding against Antar family members, a proceeding which
similarly seeks to recover substantial funds from the Antar
family.
I.
In our consideration of this petition for mandamus, we
will focus on only a small portion of the facts surrounding the
"decades-long rise and fall of an electronics retail chain called
Crazy Eddie." Id. at 570. According to the government's
allegations, the Crazy Eddie saga involved a sophisticated
family-run conspiracy that netted its principals millions of
dollars through a series of fraudulent misrepresentations and
financial disclosures that duped the general public into
investing heavily in the company. See id. at 570-71. Against
this background, we focus on our decision in Antar II and the
comments of the district judge.
In the criminal action, the government had obtained
convictions against Eddie and Mitchell Antar, the two leading
players in the Crazy Eddie epic. In Antar II, we overturned
their convictions and remanded the case for a new trial, finding
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that the district judge had improperly failed to recuse himself
because of an appearance of bias. Id. at 579. The principal
defendant in the SEC civil suit and the petitioner in the matter
before us is Sam Antar, the father of Eddie and Mitchell Antar.1
The SEC charges Sam Antar with a variety of acts relating to his
participation in the alleged Crazy Eddie conspiracy, making the
underlying factual background indistinguishable from Antar II.
Sam Antar argues that this appearance of impermissible
judicial bias that tainted his sons' convictions also forces the
same judge's recusal from the SEC action. The evidence of bias
consists of the judge's comments on the record in the criminal
proceedings.
First, Sam Antar relies on statements made by the judge
in a hearing on the disposition of money posted during the
criminal proceeding for Mitchell Antar's bail. United States v.
Mitchell Antar, Crim. No. 92-347 (D.N.J. Sept. 22, 1994) ("Antar
I"). Following his criminal conviction, Mitchell Antar was
sentenced to four years incarceration and ordered to pay
$3,000,000 in restitution. At the September 22 hearing, the
district judge considered whether the trustee/receiver,
overseeing the restitution, could execute on the $50,000 that had
been posted as bail for Mitchell Antar. Sam Antar opposed the
trustee's efforts, claiming an ownership interest in the fund and
1
Sam Antar is joined in his petition by co-defendants
Allen Antar and Benjamin Kuszer, and by eight other family
members named as relief defendants. These additional defendants
raise no additional arguments or grounds for relief. For
simplicity, we will refer only to petitioner, Sam Antar.
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arguing that he was not involved in the conspiracy. The judge
declined to rule at that time on Sam's rights to the bail money.
We reproduce the relevant colloquy:
THE COURT: . . . I realize there is a little delay on your
part. I understand there will be a delay--perhaps
a delay of a month or two or six. You may or may
not prevail ultimately. But I'm not going to pick
this thing apart piece by piece or make little
discrete pieces. All part of one puzzle. When
the puzzle is together, I'll decide.
COUNSEL: It is just frustrating to me because [Sam Antar],
my client, was not part of the majority of the
proceedings that has been before this Court. We
are a latecomer to the proceeding.
THE COURT: Right now he's being charged with certain activity
relative to the Crazy Eddie stock in connection
with the SEC proceeding. So he is part of it.
Moreover, there was testimony in the record,
whether the statute of limitations has run or not,
about his carrying millions of dollars across the
sea to Israel strapped to his body, and what-have-
you. There are all sorts of things.
Sam does not come in here with a halo on his head
based upon the testimony I heard in this case. I
can't close my eyes to it or put blinkers on. Sam
is not some innocent bystander. The innocent
bystanders laying out there are the public. The
public are the innocent bystanders. Not the Antar
family. No one in the Antar family was an
innocent bystander. That is what I'm saying.
So until we unravel the portions of the puzzle, I
think the discrete issue here is execution. That
is the discrete issue. In connection with the
execution, when there has been full discovery to
the execution, I'll decide who gets the money and
who doesn't get the money.
I'm concerned. I don't want this money withheld
from [Sam Antar] if it belongs to him.
Notwithstanding my previous comments. I want to
give everybody what they're entitled to, but we're
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not playing three-card Monte on Broad Street or
Broadway, New York. This is not a three-card
Monte game. This is not a shell game. This is
the law. This is a legal proceeding. Before we
do anything, I want it all out on the table.
COUNSEL: Your Honor, I need to state for the record some of
your statements concerning Petitioner having gone
before this Court I'll not answer now. That date
will come whenever that date is.
THE COURT: I'm telling you what the testimony was by his
brother. His brother testified to that.
COUNSEL: I accept your statements your Honor.
THE COURT: I haven't made a factual finding on it. I'm
telling you the Court is aware, having sat through
the trial, that his brother got on the stand and
testified. His nephew got on the stand and
testified.
These were things which were said about your
clients. Your client obviously was not a party to
that proceeding. He did not have to respond to
that proceeding. What I'm saying to you is this
Court cannot put blinkers on and say I never heard
that. I heard it. If I hear it, I know there is
a lot of interrelationships between these people
and a lot of money floating around. I just want
to make sure when I give money back I give it back
properly in accordance with all the facts. You
may win. I'm not saying you'll not win.
I'm not prejudging this in the least. I'm saying
fundamental fairness.
Antar I, Transcript of Proceedings at 20-23 (D.N.J. Sept. 22,
1994). Sam Antar alleges that these comments create the
appearance that the judge had predetermined the scope of Sam's
involvement in the Crazy Eddie saga, based on evidence heard in
the prosecutions of Eddie and Mitchell Antar.
5
Second, Sam Antar relies on the statement made by the
judge in the course of sentencing Eddie Antar: "My object in
this case from day one has always been to get back to the public
that which was taken from it as a result of the fraudulent
activities of this defendant and others." 53 F.3d at 573. In
Antar II, we held this statement dispositive in overturning the
convictions of Eddie and Mitchell Antar, finding that it created
the appearance of prejudice. Id. at 576. Although the statement
pertained to Eddie directly, we also reversed the conviction of
Mitchell Antar because
we cannot distinguish reasonably between Eddie and
Mitchell in this respect, as they were charged with
offenses arising from the same circumstances.
Furthermore, the judge indicated that he intended to
recover what 'this defendant,' meaning Eddie, and
'others' had taken by fraudulent activities. Clearly,
Mitchell was among the others.
Id. at 579. Sam Antar alleges that as Eddie and Mitchell's
father, he is among the "others," making the judge's statement
of purpose applicable to him as well.
II.
We have jurisdiction over a Petition for Writ of
Mandamus under the authority conferred upon us by the All Writs
Act, 28 U.S.C. § 1651(a). Although we are justifiably hesitant
in granting writs of mandamus, see In re School Asbestos Litig.,
977 F.2d 764, 772 (3d Cir. 1992), it is the settled law of this
circuit that mandamus "is a proper means for this court to review
a district court's refusal to recuse from a case pursuant to 28
U.S.C. § 455(a)." Alexander v. Primerica Holdings, Inc., 10 F.3d
155, 163 (3d Cir. 1993); see generally School Asbestos, 977 F.2d
6
at 774-78 (discussing relevant precedent, judicial procedure, and
policy implications). Where, as here, a party has made a
challenge to the judge's failure to recuse, we review the judge's
decision to hear the case on an abuse of discretion standard.
Antar II, 53 F.3d 568, 573 (3d Cir. 1995); United States v.
Dalfonso, 707 F.2d 757, 760 (3d Cir. 1983).
Because we seek to protect the public's confidence in
the judiciary, our inquiry focuses not on whether the judge
actually harbored subjective bias, but rather on whether the
record, viewed objectively, reasonably supports the appearance of
prejudice or bias. Antar II, 53 F.3d at 574; United States v.
Bertoli, 40 F.3d 1384, 1412 (3d Cir. 1994); Alexander, 10 F.3d at
162; Haines v. Liggett Group, Inc., 975 F.2d 81, 98, (3d Cir.
1992). In making this determination, we remain ever mindful that
attacks on a judge's impartiality may mask attempts to circumvent
that judge's anticipated adverse decision. Alexander, 10 F.3d at
162. We are also cognizant that our rulings in these matters
keenly affect the conduct of judges and parties in all disputed
matters before the district courts. Bertoli, 40 F.3d at 1414;
Dalfonso, 707 F.2d at 761. Accordingly, we undertake with
caution the "sensitive question of assessing all the facts and
circumstances in order to determine whether the failure to
disqualify was an abuse of sound judicial discretion." Alexander,
10 F.3d at 162.
III.
Sam Antar appears to invoke the broadest of the federal
recusal provisions, 28 U.S.C. § 455(a). He fails to mention any
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other statutory basis for disqualification, such as the specific
conditions set forth in 28 U.S.C. § 455(b). Moreover, we have
previously determined that mandamus is not a proper method for us
to review a challenge under the other federal recusal statute, 28
U.S.C. § 144. In re School Asbestos Litig., 977 F.2d 764, 776
(3d Cir. 1992); Green v. Murphy, 259 F.2d 591 (3d Cir. 1958) (in
banc). For these reasons, we will analyze this case under
§455(a).
Section 455(a) imposes a general duty on a federal
judge to recuse whenever there is an appearance of judicial
partiality: "Any justice, judge, or magistrate of the United
States shall disqualify himself in any proceeding in which his
impartiality might reasonably be questioned." 28 U.S.C. §455(a).
The Supreme Court most recently addressed the application of this
provision in Liteky v. United States, ___ U.S. ___, 114 S.Ct.
1147 (1994). We have subsequently interpreted and applied the
provision in Blanche Road Corp. v. Bensalem Township, 57 F.3d 253(3d. Cir.), cert. denied, ___ U.S. ___, 1995 WL 500513 (Oct. 10,
1995), Antar II, 53 F.3d 568 (3d Cir. 1995), and United States v.
Bertoli, 40 F.3d 1384 (3d Cir. 1994). These precedents guide our
inquiry.
In Liteky, the Supreme Court made clear that the
ultimate issue for recusal is the appearance of a wrongful or
inappropriate bias or prejudice. 114 S.Ct. at 1157. The Court
stressed the importance of the extrajudicial source doctrine in
assessing a judge's unfavorable disposition toward a litigant.
Although the Court provided a lengthy discussion of that
8
doctrine's significance, the Court ultimately concluded that the
extrajudicial source is not outcome determinative. The most
critical factor is not the source of the judge's prejudicial
knowledge or bias, but rather the judge's "inability to render
fair judgment." Id. at 1155.
Justice Kennedy in his concurrence in Liteky stated the
same principle, but from a different point of view, that of a
judge abiding by his oath: "Judges, if faithful to their oath,
approach every aspect of each case with a neutral and objective
disposition." Id. at 1160.
We find that our decision in Antar II controls the
application of this principle to the petition before us. We
determined in Antar II that the judge's statement as to his
"object in this case from day one" revealed a goal that "was
something other than what it should have been and, indeed, was
improper." 53 F.3d at 576. This indicates that the judge's
purpose was at odds with his judicially mandated responsibility
to provide a fair trial and impartial forum for the litigants
before him. See Haines, 975 F.2d at 98 ("The right to trial by
an impartial judge 'is a basic requirement of due process.'")
(quoting In re Murchison, 349 U.S. 133, 136 (1955)). The comment
therefore manifested an improper bias or prejudice against Eddie
and Mitchell Antar and "others" in the family. We reject out of
hand the contention that Sam Antar might not be one of these
"others."
This same improper bias or prejudice against the Antar
family is relevant to the SEC proceeding. The SEC is asking that
9
the Antars be required to disgorge funds gained through the
securities fraud conspiracy. We conclude therefore that the
district judge's comments rise to the level of "wrongful" bias
and require his disqualification in the SEC proceeding. The
comment we made in reversing the criminal conviction has a
similar bearing to the SEC action:
It is difficult to imagine a starker example
of when opinions formed during the course of
judicial proceedings display a high degree of
antagonism against a criminal defendant.
After all, the best way to effectuate the
district judge's goal would have been to
ensure that the government got as free a road
as possible towards a conviction, which then
would give the judge the requisite leverage
to order a large amount of restitution.
53 F.3d at 576.
When the district judge announced that his goal in the
criminal action was to recover for the investing public the funds
which they had lost through the Antars' schemes, he also created
the appearance that he had allied himself with the SEC in the
civil action. The judge "display[ed] a deep-seated favoritism
or antagonism that would make fair judgment impossible." Liteky,
114 S.Ct. at 1157; Bertoli, 40 F.3d at 1412 (quoting Liteky).
In reaching this result, we need not debate alternative
characterizations of the judge's comments nor quibble over
whether his opinions were based on extrajudicial or judicial
sources. Taken together, his statement of purpose in Eddie
Antar's sentencing hearing and his comments on Sam Antar in
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Mitchell Antar's bail proceeding create an appearance of bias
that meets the required thresholds in both character and degree.2
It suffices to say that on the facts before us, our precedents
require recusal.
IV.
For these reasons, we will grant the Petition for Writ
of Mandamus, requiring that further proceedings in SEC v. Antar,
Civil No. 93-3988, be held before a different district judge to
be selected by the Chief Judge of the District of New Jersey.
2
We expressly decline to consider whether, absent our
determination in Antar II that Judge Politan must be disqualified
because of his statement at the sentencing hearing, we would draw
the same conclusion from the statements in Mitchell Antar's bail
proceeding alone.
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